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Saturday, July 09, 2005

Poor Laws cause Intel India Exit

Intel freezes $400m India investment
- By Urvashi Kaul

New Delhi, July 8: Global chip manufacturer Intel has frozen plans to invest $400 million in India for the setting up of a manufacturing plant. The move is seen as a major dampener to the UPA government’s plan to attract foreign investment,

After returning from his trip to the US last month to woo IT and telecom majors to set up manufacturing bases in India, information technology minister Dayanidhi Maran had told reporters in New Delhi that Intel had chosen India for its manufacturing unit and that investment up to $400 million was expected.

Sources said a formal announcement on the deal was meant to be made during Prime Minister Manmohan Singh’s visit to the US later this month. But they added that Intel has now told the government that it has a problem with India’s intellectual property laws on semi-conductors. Intel argues that they are not effective enough.

Official sources said Intel, which was considering Chennai, Bangalore and Noida as possible locations for its unit, has conveyed to the government its decision to pull out from India. Earlier, Mr Maran had claimed that Intel would make an announcement on the location in a month. Mr Maran had also claimed that his "fruitful discussions" with Intel CEO Craig Barret, who was previously considering China and Vietnam, had led to finalising India as the location for its plant. The minister had asserted that the deal was clinched in India’s favour as he was successfully able to present India as a booming market with investor-friendly policies.

The government policy on promoting IT special economic zones with 15-year tax breaks and market access had clinched the deal in India’s favour, he was quoted as saying. But sources said that India appears to have lost the deal to China.

When contacted, an Intel spokesman seemed to contradict Mr Maran’s suggestion that Intel was all set to have the plant in India. "Intel has not announced any plans to build a plant in India," he said. "Intel is always looking around the world exploring potential new sites, and I’m sure we’ve looked in India, China and many other places around the world," the spokesman said. He hinted that there had been only initial "explorative activities".

"However, these explorative activities don’t mean we will or won’t build a site in a given country," he said. Since no plans to set up a plant have been announced, the question on the investment plans is "speculative" in nature, he added.

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